Bandwidth (BAND) 28 Feb 242023 Q4 Earnings call transcript

Hello, and welcome to the Bandwidth Inc. Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call to Sarah Walas. Please go ahead.

you. Thank welcome Quarter and Earnings Bandwidth's to morning, XXXX Fourth Call. Good in discuss release the we'll our results Today, morning. announced press this issued earlier press the earnings can The investors.bandwidth.com. an historical and highlights financial presentation be Relations Investor with on page at found release call on is morning Daryl the CEO; David our CFO. With our and this me Morken, Raiford, the Q&A. will prepared and remarks, for They then we call begin with will open up

financial business guidance we or not will on forward-looking the We we statements or make that statements. our may plans uncertainties reflect outcomes they the as to forward-looking call, to that presentation made including in of XXXX. statements be by forward-looking involve today, the these expressed and and have materially During cause concerning may to results quarter results to risks related implied Any our actual for this analysis as first slides vary update the of reliance full no and forward-looking, call considered statements statements may on our put them. year and undue you obligation future from or caution any

at website For refer bandwidth.com latest discussion of those results, could actual affect in of at the please available on SEC sec.gov. are website factors which section and updated material our our and important Relations a other our by as of XX-K that all filing contained other to risks filings, SEC's Investor the on

located morning website of as our reconciliation investors.bandwidth.com. press is the course our as today's will included to A measures this we at presentation, of issued which in the During non-GAAP measures. we well earlier are earnings release non-GAAP to on refer certain call, GAAP financial in

turn to the me David. let over that, With call

And We for Earnings fourth large and execution. Bridge enterprise direct Welcome Sarah. QX year categories. Thank and guidance our by capping report introduced significant profitability to you, like diversified Bandwidth's platform our we XX% year-over-year of adjusted [ revenue flow. grew fourth a business and quarter by we commercial off products world. you grateful serving half exceeded our for solid and our our into We we customers communication grew full our and our Thank new God charge record free AI Call. second of messaging We're The ] in and a the as as across mission the XXXX pleased and company. Maestro the number XXth invested to our and a adding quarter next-generation yielding services our record to our results. team bandmates customers, cash their a in I Bandwidth provide in customers' EBITDA around business-critical to is delivering these during honored executing thank to trust strong year

more to said is when are we After and way messaging network, better is voice, costs, and our because the were for Last calling its transformation software through digital and a leverage plan experience, emergency the since. is operating ranks the to text emerging simplify Automating reduce cloud early which sector year, That's out Day, confident stages. at the Bandwidth fastest brand a programmable technologies and derisk APIs build AI-ready with a enterprises AI X-year community cloud develop year, doing operated the are they're any and space cloud we insight. software of during combination it confident in we only and because global the today. company-wide, laid and capabilities, our started deep unique deliver regulatory with worldwide a owned to first provider the company about power for still we our time of and mission Investor front even we our Bandwidth leading plans communicate more trend in than revolution, in exceeding or

AWS, always cloud depth on and or contact building and innovative conversational all Google Zoom our as like leading-edge customer the platforms The provider Genesys from centers CPaaS only innovation everything cloud for for by customer by competitive fact Today, experience messaging we is SaaS reliability, recognized that like the global All evidenced FiveX moat or pioneers incredible many for reach, cloud. we these power healthcare and and their are breadth Research, security, in is hyperscalers communications text leading the companies available hybrid Gartner serve players Microsoft, the XX/X. to Bandwidth iconic, support e-commerce, our skill, work, of is world's into cloud. application it's with count communications global communications that us own whether

we programmable of That's we us serving key launch global category, calling businesses capabilities. improved the a XX,XXX why in a placing self-service trust in the customer as best-in-class to switched our continued year, past voice expansive TNS, provider already expand investment their many services. other from and separate new capabilities. features provider communications competitor [indiscernible] with for our the to their toll-free During Bandwidth our experience innovation and new mission-critical with sole In

ready to our category, game which enterprise such our next-gen Bandwidth's be products new XX In was a we changer it Enterprise that judged Show platform, [indiscernible] Best software by including of Connect. won launched Maestro, at our peers

last a drove just the own to AI. others. and ] Western Internet substantial Ally each In Health, from improve ], revenue enterprise Fabletics Product These adopt industry to recognition their Maestro Telephony Children's accelerated led customer right new growth [ [ offerings, chose Bandwidth many and as Financial fact, new pipeline so Union, Year XX% wins to for experiences of and All opportunity continues customer conversational week. like new year-over-year highs, to their our won our in it award

healthcare premier we technology Last category, deliver bandwidth provider which fintech, care across caregivers competitor, their in messaging messaging U.S. the us using care the engagement, capabilities community X,XXX more. example, use America, we fuel most health new agencies patient trusting markets for in are communications high-volume to engagement, centers services year-over-year. our way ], are and messaging programmable more civic API messaging and our global XXX,XXX around XX% world more personal which to commercial between our year, adding and vital commercial HIPAA-compliant new conversational across grew a In continue we expect demanding, global North of The cases diverse rest the QX e-commerce to from moved Like [ for than in and and a WellSky its Canada. voice growth.

Cloud. [ rapid [ growth U.S. capabilities long-standing serve XXXX, expect in the these messaging by customers. ] ] our joined many and the [indiscernible] further Each the of truly from examples one our In innovative season we to be commercial election capabilities growth where of benefit demonstrates Bandwidth

year, are through our with [ and in grow we pleased cross the wins As [indiscernible] forward momentum execution ] we past environment. reflect on any the current

customers expect our hosted For far. revenue and growth as from than profitability more other remarkable has from revenue in And year outpacing Global would profitably. by on XXXX a prospects large shown XXXX example, ever. deliver launched you we durable enterprise in increases our our to significantly We Maestro and any we promise in-person AI biggest visits grow as franchise, innovations our Bridge,

than year are mission As we and XXth opportunity before. a in confident more enter our milestone company, we our ever as

over financial results walk it turn our through outlook. details of now and to to the Daryl I'll

Thank good morning, and everyone. you, David,

guidance and and and forward. the fourth of of hard [ drive excellence laser us and results in medium-term proud well exceeding revenue is unwavering sustainable, that end consistent fourth We're work The with our benefited commitment XXXX ranges to positioning will reach solid high strong ] we've confident team's usage to accelerating discipline. quarter, focus and performance exceptionally our of commercial targets. continue performed operating year team us dedication, our EBITDA growth messaging evident rounding to accomplished Our and once from we a year profitable both on in in full again quarter adjusted as what

increased total $XX messaging total pass-through revenue XX% the effect was revenue of million $XXX million of excluding excluding $XXX political year-over-year. million, revenue X% XXXX. Cloud Communications cyclical which year-over-year revenue of when Fourth messaging in up surcharges, campaign quarter is

Our full up campaign up $XXX revenue also revenue million, when was year excluding benefit. XXXX million, year-over-year Communications year's year-over-year. last messaging X% was political X% Cloud $XXX

drove in deliver customers and market. for strong differentiate scale tool Bandwidth themselves ability to Messaging to at business used is be messaging messaging, a The engage automated the continues Cloud valuable and the to Communication year software year-over-year in for with revenue. Total and full of financial services sectors. XX% demand increasing messaging conversational by e-commerce, conversational in XX% driven marketing reached usage commercial revenue growth

category, ago, year our usage XXXX, X expectations far revenue category this and expected our ago. communications Day view growth targets. revenue patterns In year. This of of our with for cited flat and was growth programmable XX% portfolio, by Day performance, year-over-year. pleased growth utilizes towards macro environment margin last services provides market medium-term market outpaced for services to provided roughly very global our Investor messaging commercial a categories. revenue due our primarily support growth X which XXXX our Investor the year plans category, we shared at gross and programmable we rates those X our which of At XXXX revenue In as CAGR in meaningful XX% the in new market expected our offer delivered growth We're

exceeding Last year market of in our growth the we XX% at category, CAGR XX% customer estimated shared year-over-year, Day. grew Investor enterprise handily direct to

Bandwidth automation. love customers software Our

the with and to objectives aligns conversational simplify the Global migration best-in-breed capabilities perfectly flows experiences call to enable Our global and between orchestrate cloud, XXXX. AI facilitate of communications, the platforms goals

services achieving to and of enterprise medium-term expect trajectory enterprise I'd them XX%. direct thrilled like excess remind contributors in the aggregate our categories gross target with also XXXX of the programmable margin enjoys We're than to gross XX%. our to you that margins company programmable greater margin and of consistent to and be gross of

focus customer reflecting to reaching Average on ability to turning customer fourth annual metrics. our continued climb, opportunities. operating large per $XXX,XXX to in the continued and serve revenue quarter, Now

durability customer name a customer excess retention once our of rate speaks in XX%, remained and loyalty result of to again Our the that base.

retention net pressure result characterized excellent of our XXXX Adjusting XXX%. macro campaign XXX%, commercial present downward from XXXX an rate that year net retention rate, was absence our customers not revenue XXXX for achieved absence, crosswinds. understandably the growth reflected for from by in Our which a

our business outstanding of of and second generating flexibility. financial balance I'm XX% year the cash We We XXXX in in million, ended proud in needs adjusted a us great an and accelerating inflection far point record free with record $XXX $XX cash. EBITDA flow, with half exceeding in our in a generating and of year. deal and cash profitability providing achieved securities a growth million especially a of progress the the reached

associated look expected surcharges XXXX $XXX cyclical to million from and continued campaign in tailwind grow and we a the election expecting political political as to from we're campaign and election season. from excited Revenue U.S. contribution in XXXX, messaging assumes commercial approximately $XX million season. We're the is a to U.S. revenue where ahead accelerating to XX% related growth projected messaging

We and year-over-year, of with continue adjusted our continued profitability acceleration expect of spending EBITDA to higher a revenue discipline. growth combination in through operating XX% accomplished and

towards fully free medium-term margins needs. XX% provide notes to XXXX fund make expect the our to cash also We further business margin address flow target and our convertible XXXX progress flexibility our of and

put to our fine sheet. a on like I'd point balance healthy

As and XXXX I said, ended million $XXX in securities. cash with we

we of XXXX $XX a cash balance of excess approximately million. debt March XXXX, $XX modest has an Our months million face advance light reasonable adjusted relatively a generate of in that With outstanding of $XXX value it's year and approximately in XXXX projection capital, X% full expenditures to of in clearly yielding a debt requirements, XX cash our million project outlook maturity. our of securities and revenue of in capital maturity working could EBITDA

adjusted this to reiterating and XX% non-GAAP than greater XXXX CAGR, our of flow than XX% revenue free greater margins medium-term gross XX% XX% of EBITDA cash us margins, than greater in All confidence margins. gives XX% targets

Bandwidth upon I closing, In remarkable year. journey emphasize want has the this past to embarked

Cloud of platform, AI-ready Our and innovation The and of Maestro global Communications global capabilities free expertise flow, our our to commitment in regulatory unique underscore leadership automation, trust blend launch customer cash of the performance network, unwavering record-breaking revolution. successful software our our partnership and credibility and base, the alongside powered excellence. solidify in groundbreaking our by

focused customer and long [indiscernible] leveraging sustainable strengths Looking [indiscernible] enhance term on drive shareholders. growth, ahead, our we remain to competitive to deliver our

Day and incredibly year we your focused am clear of continued outlined at and our Investor team's direction hard support Thanks how proud our work of vision for excited Bandwidth. about we dedication, again I and executing strategic the are X ago. confident in

the I'd call question now the to answer the to begin portion. to like over turn operator and

Arjun with first Instructions] [Operator Blair. William Today's question comes Bhatia from

we programmable certainly can was you seeing wanted pretty 'XX. kind that of like growth maybe the you're services, strong enterprise the retention and you're outlook QX, the on on executing that calibrate on it there delivering, that. a rate you're Congrats was kind a like I the But there both you in start versus and into more here talk know the traction results front maybe come if strong here? top to and opportunities pipeline some sounds it but new net Maybe to little of seeing positive of of traction. perspective. about seems bit bit I you're you're mentioned think 'XX the that a line QX seeing for bit little in going and whether just a from and just customer into it about going I what a from competitors to on wanted

David. Thanks, This Arjun. is

opportunities. and greenfield both from and success competitors strong The in different well enjoying enterprise as is programmable services. as are different verticals success We across

deep pipeline is it's opportunities. large the -- So in

that. benefiting verticals called the again, across competitors that out we're We the uniqueness winning cases. network. a different the of And and number on the offer those, of and across and so global from in platforms customer we're And efficiency specific based we

has not 'XX. successful ending the going it looks been robust So 'XX, into just but pipeline

adoption just with give still products? us those starting bit And And can game-changing see adoption customers? AI in when seeing of a sense of like about because seems potential helpful. Or very That's you Maestro solutions yet? then thinking and of Okay. kind little we where phase certainly that is you it a are in real [indiscernible] -- to you're Bridge, are

into winners ago. and scaling experiencing genuine are we one across strong adoption very to global do with leading enterprise long we AI Maestro. that to and conviction customer to early integrate customers. vital on emerge of AI a and environments do [indiscernible] our more in days are easily, Again, and their as real what's picking they so upon opportunities is platform existing [indiscernible] have in them is strategy it's And having done to integrations allows that so went that a embarked AI We the terms already quickly that

product in release space of initiatives are the only so even both our midyear. already, general we fruit AI And though went bearing

The from Ryan next MacWilliams Barclays. is question with

revenue quarter? are in they of to this the feel you XXXX? saw about expect XXXX Do the solid how Do customers talking enterprise Daryl, think at of point? better? And your should grow we drivers about how David, for of they XQ growth some the

bet. You

that today about their think we when talking and course, it we of how with So varies about they're our customers business, work enterprise widely.

a examples customers guide. real enterprise usage-based We is time got how customers have financial tremendous in We've we hyperscaler factoring and upon experiencing Certainly, among our Internet Everyone are into always in tuned our the model, diverse. projected and giants. variable have -- that depending our a different vertical customers. into in doing your

last broader strong in promise macro, So even navigated about our the as choppier we we've occurrence as think front year. more is that than and with filled and guide executed across think indicates 'XX

strong for $X we right, Part you're our grew question, your We -- messaging million. commercial political to quarter. fourth with [indiscernible] not did related in that and Ryan, Communications off finish in quarter. messaging, grew in grew fourth third year to Cloud do is we quarter, And commercial revenue David. campaign meaning We the the Thanks, of XXXX very the of at commercial a effect. the growth XX% XX% we the XX%

that helped. course, of So -- that

included of in in have Friday, results. also also overachievement We Cyber we Monday, our Black through the the shines Cyber Friday, these of which Black seasonal benefit But Monday had guide.

profitability line improvement guide Like prior see the can forward. year impressed Excellent. able besides especially some and are doing one just I'm are that the things achieve you're of we And what really me. better How growth, put revenue in what better be numbers? through items? going by leverage? Bandwidth last for these the flow the the to cash Or set to free with like EBITDA

above and EBITDA CAGR, our Well, XX% margin. free through above margin XX% out revenue where to yielding to growing gross to XX% XXXX, growing margin, we've that points medium-term to XX% an above targets cash flow the set XX%

So Well, how revenue that? yes, are we growth. doing

XX% margin, X track said we Cloud on revenue, or that -- was -- Investor product focus Day, -- -- operating our year still [indiscernible] that. which above We from drivers to of last something but above at as as efficiencies, be or less. was we're sort XXXX Communications we're and going to our continuing of expense do growth We're includes international and XX%. down at a are scale, And mix, we operating on scaling to have to gross slightly and percent, for the and

increase, innovation operating while to -- don't -- to led our we expenses do our we primarily we so continue And by investments. expect

We our flow. been expense, operating us that, yield and and of free XX% cash above get our -- XX% out we to scale above doing will expect have and that

comes Stanley. question next with Meta The from Morgan Marshall

a couple questions. Maybe of

some of you're of sense guys you've kicking of will would million laid then XXXX. from. the of on that other any as the of And continued in messaging about it the a What kind would Maestro, update the in? the in biggest it only driver kind commercial you're be messaging? that joined or be considering CCaaS of maybe a second, just you is that So growth that products expecting growth rest is of the be out of of half relationships of to growth the that a growth? kind rest the kind where So channel contributor come of Is seeing political about it some Just growth? $XX

turns messaging their cycle campaign-related out do quite we first answer and even their in To Meta. fastest. that's that they're are And of customers participate diversifying practice your growth seeing business. activities. strongest among to enterprise customers among our enterprise our Commercial durable, part in question, the growing Thanks, segment be

messaging, to out. which we messaging, the going continue commercial messaging guidance towards all that So launched, just 'XX has medium-term lay doing will done, in both targets 'XX, we've the to us achieved buoyant. And consistently we is be look yes, we what commercial and be for to which as price, achieved significantly contribute global

contact the on center? Yes. [indiscernible]

I think -- yes.

I think dynamic make what understand sure, contact you're part and -- in repeat focusing so of just question, the you the on? center to can I

you some others. FiveX think I and had So relationships with done

kind of that a I as growth. sense on to just get So a of channel wanted

Yes, you bet.

that quarter. power case Genesys to chosen the would the I experience that I for we center mentioned and think [indiscernible], from their call -- and is by incumbent. what with were an did customer is out away we cloud winning healthy, that Contact business

hand in in glove contact a took we're customer, So that that away with Genesys tremendous which we with from an incumbent. center opportunity is that

And center. pipeline conquest contact against our more seeing we're so opportunities and in more in incumbents

enterprise. us, for So great powering distinguish contact center us seeing challenger others and success and those may as and that of separate us we're in us from a CCaaS the

comes with next The Fish Sandler. from question James Piper

Nice the to end I appreciate actually. morning and the I of like call year here, it.

guys a think Just know this point. we've bit a is monetization gaining Or point? talked attach? at traction are Maestro going I should back to it, we most of kind for ago. And strategies with seeing strategy Maestro this at sizing about the you question how little What which about different

for it's catalyst conversation. the elegantly and doing allows and conversations across the terms in it's messaging to is catalyst platform a attach them solutions, how orchestrate their that of it their voice because even employees inflection regarding the with they're different messaging voice constituencies So for games, or

[indiscernible], and that's into Right not a with are going with how vision any path a forward things regarding And win. seeing voice is using creative vision from takes enterprises account of to emerging messaging AI. are, we win one AI. you're for don't supporting have complete now, lack have opportunities of and fluid the effective what you execution and compete we across to an if both have for and You

GA. And is successfully of orchestration midyear. tool, by generally our Maestro customers dozens It was engaged for so enterprise being at released availability already

new This, what part what question, that that strategy to a the your addition we opportunity a would we've the is for model us, maintained, real software very in the in model is platform consistently the to address to serve to monetization monetizes have. happen. of most second you traction software is customers And as expect usage-based SaaS which getting

margins SaaS would gross and you software. fee platform from that expect a So

Makes sense. for And Daryl, you.

are back bit really you you if wasn't there. expecting the in appreciate rates messaging more in and On 'XX, about right But up back cycle. major $XX political it in it color I little terms XXXX? you're frame Can the election million, the [indiscernible] help guys for had what here of numbers a just expansion and the

point? details. I lot higher about it's of this bigger any at So to X the of know way a think why year-end? And for kind appreciate the given it product a question, wouldn't segments be the stage

No. all Jim. appreciate I love appreciate XX-part questions. I Thank you, you, that.

breakdown just the through Let guidance. start me a with walking of

helpful. I over called our in think million essentially We're outlook, that revenue of $XXX 'XX. will growth 'XX be in

in $XX Communications can million commercial of You means revenue in towards our X/X think Cloud in our coming political. commercial coming X/X view, Cloud Communications and coming revenue in million that surcharges. Of increase growth our into in nonpolitical, breaking from which from in million outlook $XX revenue, the that's and $XX our from, essentially

for taken We're off We did revenue around the election $XX cycle. million 'XX altogether our calling in $XX this. experience million of guide around

-- little We -- for million of it right to could a less little it than So it some right, now. certainly possible is that is it calling is we're about higher. around about But XX%, less that what $XX be up. possible, you're in be

of 'XX the I was part the believe, second view. the question, of categories, the Now terms categories to which related our and in driving

We each guide in revenue the for increase. embedded categories. our a have calling to one are It's of

muted of and full growth year. large revenue more QX. that in We will increased in Our QX again, XX% in will base. just probably plans, because But XX% its largest XXXX experienced commercial for revenue the is global messaging category was communications it revenue XX% likewise be the

on the programmable that and one the terms the David cases not in growth called accelerated and services cases are out our is the related that commercial see political to use driving I growth. -- are we commercial had So are of the messaging, call. principally Those which

And in we Enterprise, for year. enterprise grow the did XX%

a good. for growth base. customer And really of there's looks very a it's is a loyal, -- sticky very course, the durable major also pipeline very profitable dynamic. once and Our adopted, very Enterprise us, given

well increase the we the $XXX so on outgrow $XXX -- help, million for the XX% that to expecting million 'XX. Does overall are And given that guide to Jim? we've that

Yes. Yes. Apologies the for loaded question.

Just to that had a we of details need lot understand. there

The next comes Canaccord Walkley question Mike from Genuity. with

the on that's a primaries back Congrats question for guess lot me, results. of I I political had just messaging. strong the political going to it's received first state live in already messaging. a and

So of still QX, the that year? Is for that heavy it ramp QX $XX how throughout million. kind a Or of weighted? kind does

throughout think that activity it's candidate I is sides, growth primary think actually post back half. point yes, an back the Super Mike, increased earlier you'll half. the to the than rational Tuesday with But selected year. inflection for I both the expect accelerated see throughout

the of customer Great. in you're with having the the enterprise terms you building then just larger are end trends large And your some process in with customers? customers, That's for you how seeing ARPU churning And -- modeling. success still of helpful base? are lower

We are.

to customer it our once Our so our strategy where at opportunities. exactly [indiscernible]. ] excited to number, remained larger because steady, now just Global I'm fact the we to are we revenue need think about something [ [indiscernible] excited right the our flat. removed for the we figure in right the We to on really exact customer customer It's not concern be. added steady around we that X,XXX strategy increased ARR reaching $XXX,XXX that where and same And right I'm annual change. ] churned that the [indiscernible] per exactly us. XX about our be and customers, -- and at again remained the $X,XXX XXXX that's [ revenue relatively And it's customers we so figure. wanted XX a customer annual -- base -- on like -- with really

with question & Ryan The from Company. next comes Needham Koontz

enterprise? voice terms where that to that of walk maybe, in terms going to and how developing business you've returning could of been Nice you're through share go-to-market voice you David, Sorry growth. the here. metrics you about headcount, in for my your Can see is team? where us Any

Great competitors, was than or into question. many into of Unlike large going go-to-market so our is it as going team larger our 'XX 'XX.

we consistently to have the in put used So forward. have fuel the fire continued only going that we

eviscerated spaces so go-to-market in teams we layoffs. -- any in many marketing, and haven't ops, haven't So we sales sales, many have done different

are And for and also fully new out customers, supporting and the we're so we bear fully loaded going in customers. prospecting existing enterprise space staffed

again, in 'XX the benefits So guide. growing other on held and are team we've so unlike company and the profiles, line our manifest the many in reported also the 'XX

The comes next Citizens JMP. from Walravens with question Patrick

had to has a a challenging. that COVID Europe they of can Dave, kind out? the communication Congratulations. talk we international we're great how provide originally, in worked pushing and time acquired And in services integration XXXX. Great. customers So go then back you bit in lighthouse had Bandwidth little about really the you Voxbone in as U.S. made And remember, I

versus all that worked has how international So the is out? How U.S.?

where conversation than much customer reflects. a XX% our service Every Pat. Thanks, but meaningful with messaging. total outbound have our XX countries PSTN inbound Global XXXX It includes and now just we emergency recently replacement, of business, is that includes more full international

So for very in slowed that essential us can regulatory and it down. customers that's world role if have, of that partner is has a single a use they our where been fragmented anything, pace vital approvals globally as become

component. international was essential So an strategically

about experience efforts platform to indeed, and But thrilled single our it. post slow was the coming integration. during COVID, by a it during having right, We're we for us teams the You're unify. customers are acquisition. to Voxbone And for heroic global the of end

your global for vital expect of there. XX% continue every Our but team has our conversation. back growing, the single addition business to right with we messaging of grow now and the it worked get and question, long enterprise to of But crux to

concludes you. question-and-answer our Thank today's the conference this session, for concluded. you presentation. and Thank attending has now

You lines. your may now disconnect